What is a credit card cash advance rate — and how does it work?

If you’re short on the cash needed to make an important purchase, taking out a cash advance on your credit card can be a good option. Not only are credit card cash advances a quick and easy way to withdraw funds from the card you already have in your wallet, but you also don’t need a fresh credit check to access those funds.

But before making this move, it’s important to understand that the terms for cash advances on your credit card tend to be quite different from using it to purchase goods and services. In particular, cash advance interest rates are typically higher than credit card purchase interest rates — and they start accruing on day one.

To help you make an informed decision about whether to take out a cash advance, let’s examine those rates and how they work — and discuss some key differences between cash advances and regular credit card purchases.

The lowdown on cash advance rates

Cash advances tend to carry a higher interest rate than the standard purchase interest rate on your credit card. While purchase interest rates on credit cards start as low as 12.99% and up to 20.99%, cash advance rates tend to be much higher — typically in the range of 22.99% to 27.99%. You’ll find your rates listed in your cardholder agreement. 

There’s no interest-free grace period

While you’re probably accustomed to enjoying that minimum 21-day interest-free grace period when making regular purchases on your credit card, it’s important to note there’s no such grace period when it comes to cash advances.

In other words, you’ll pay interest on your cash advance from the day of the transaction until the day you pay off the full amount.

You can stop cash advance interest from accruing

To keep the interest on your cash advance from accruing, the best thing to do is to pay off your entire credit card balance as quickly as possible.

Here’s why: If your credit card statement shows you’ve been making cash advances at the higher interest rate, as well as buying goods or services at the lower purchase rate, you can’t ask that the amount you owe in cash advances be paid off first.  

Instead, your payment will be split proportionally against the balance on each interest rate. So, if you’re not paying off your entire balance for several months, that higher cash advance rate will stick with you for quite a while, too. 

Cash advance fees can be added on top of interest

Along with paying interest on a cash advance, you’ll typically be charged a flat fee to take out a cash advance. These fees vary among cards and card issuers, so review your cardholder agreement to find out the exact fee that applies to you. 

How to use cash advances — and what counts as one

The cash advance spending limit on your credit card is only a portion of your card’s total limit, so know your number before you take out an advance.

The most recognized way to receive a cash advance is using your credit card to withdraw money at an ATM with the PIN assigned to your account. Note there may be a bank fee for using the machine, as well. Here are other ways to obtain a cash advance: 

At the bank or with a credit card cheque

This is also known as a convenience cheque or promotional cheque. Knowing your cash advance spending limit is especially important if you’re writing a credit card cheque; if you write it for an amount that exceeds your limit, the cheque will be declined and returned, and a dishonored payment fee will be charged

Transferring funds from your credit card to your chequing account

Moving funds from your credit card to your chequing or savings account is also considered a cash advance. That’s the case whether you’re making the transfer online, over the phone or in the branch. 

Making “cash-like” transactions

Check your cardholder agreement to see what applies, but cash advances typically apply for purchases like lottery tickets, gaming chips or bets at kiosks or in an online casino; travelers’ cheques; foreign or virtual currencies; and wire transfers. Bill payments are also considered cash-like transactions, so arrange these payments as preauthorized charges with the merchant to ensure they’re treated as regular purchases.

Remember that you can always get in touch with your card issuer if you’re unsure about whether a transaction will be treated as a regular purchase or cash advance.

The lowdown on rewards

If you’re a big fan of earning cash-back credits or points on your credit card, stick with purchases. Rewards don’t apply to cash advances.

Relying on cash advances

Credit card cash advances can be a useful tool, but advance rates are typically higher than purchase rates — so these cash advances should been treated as a last resort, rather than a habit. Be sure to fully understand the cash advance interest rates in your cardholder agreement so you’re able to responsibly use your credit card cash advance. 

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